Sri Lanka has awarded a $252.3 million project to Chinese dam builder Sinohydro to construct a reservoir, the island nation's government said on Friday.

"The cabinet granted approval to award the contract for the construction ... to Sinohydro to a sum of $252.3 million and to enter into a commercial agreement accordingly," the official cabinet decisions released by the government showed.

The cabinet memorandum obtained by Reuters stated Sinohydro will arrange finance assistance for the project from a bank in China on terms and conditions acceptable to Sri Lanka.

Officials from Sinohydro were not available for comments.

The Chinese firm is already involved in a $1.5 billion port construction and a $100 million road project in the former northern war zone.

Sri Lanka has been increasingly depending on China for its post-war infrastructure project financing amid heavy pressure from Western countries to probe war crimes stemming from the last phase of a 25-year war ended in May 2009.

China was Sri Lanka's largest lender in 2009 and 2010, giving $1.2 billion and $821 million respectively.

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